As the polished copper petals of Thomas Heatherwick's Olympic cauldron rose up to form a striking flaming dandelion last July, gasps of awe and wonder echoed around the world at the structure's startling originality. In the offices of the New York design studio Atopia, however, there were gasps of a different kind.

"We were absolutely furious," said the practice's co-director Jane Harrison. "It looked identical to something we had proposed to the London Olympic committee back in 2007, after which we hadn't heard anything."

Locog originally approached Atopia, whose motto is "anticipate the future", to come up with ideas for a One Planet pavilion, a structure to embody the sustainable ethos behind the London Games.

"Our pitch was all about the story," Harrison said. "We devised a structure of petals on tall stems, which would travel from all of the participating countries, then be brought into the stadium by children. The petals would be assembled during the opening ceremony to form a flower-like canopy, and distributed back to the different nations after the Games."

Atopia's structure was designed to collect rainwater and generate power from solar cells rather than burning a constant supply of natural gas, but their sketches and models bear an uncanny resemblance to Heatherwick's design. His flaming flower also used the narrative sequence of the 205 nations coming together, with the metal dishes returned to the competing countries after the Olympics. It was critically acclaimed, won several awards, and earned the designer a place in the Queen's birthday honours list. His practice denies all knowledge of Atopia's earlier design.

"This has come completely out of the blue," a spokesperson for Heatherwick Studio said. "We have never seen this project before, nor were we made aware of it by Locog. The creative ideas for the cauldron were very much born from a conversation between Danny Boyle and Thomas Heatherwick."

Atopia is only now free to make its claims, having been gagged by a restrictive non-disclosure agreement since 2007 that prevented all companies from promoting any work related to the Olympics. The confidentiality agreement was lifted in January after a vociferous campaign and a government payment of £2m to the British Olympic Association.

Atopia, which also produced a white paper on strategic sustainability issues which it says was taken forward by Locog's contractors, has not received any payment for its work.

"It was a crushing disappointment," said Harrison, a British-trained architect who has run the practice with David Turnbull for 10 years while also teaching at Princeton University. "We were led to believe it was a confidential presentation to the high-level board, so it was even more shocking to see the ideas had been taken forward by others without us. We are a small office, so we can't afford to launch legal action."

Locog has been disbanded, but its former design principal, Kevin Owens, described the situation as "unfortunate". "Atopia really are forward thinkers," he said. "Strands of their work became part of what was taken forward, and I wish there was a way we could acknowledge that."

Owens said he had never seen images of their proposals, but that their strong narrative must have "stayed in the psyche" of his colleagues, who commissioned the opening ceremony. "We can only assume that similar conclusions were drawn by the designers," he added.

Atopia's accusations follow claims last year by Hull artist Lee Merrill Sendall that Boyle's opening ceremony design was copied from a project he had submitted in 2009 to Locog's Artists Taking the Lead competition. The artist proposed the construction of a 61m (200ft) spiralling Neolithic mound in east Yorkshire to represent the UK's ancient history. His images also featured a lake, farmhouse and fluffy white clouds, all of which appeared in the opening ceremony alongside a spiralling mound said to represent Glastonbury Tor.

Locog denied Sendall's claim, saying Boyle's vision for the opening ceremony "was inspired by the very well-known Glastonbury Tor landmark and British history. The vision was Danny Boyle's and his only".

"This is definitely something worth investigating," said Lionel Bently, professor of intellectual property at the University of Cambridge. "There is a strong body of case law about the confidentiality of submissions. If Atopia's idea was regarded as a confidential pitch of an idea from designer to recipient, there could well be grounds for breach of confidence proceedings."

"The whole process reveals the ease with which big organisations tend to absorb creative input and adopt it over time almost unconsciously," said Harrison. "Either that, or we're the best clairvoyants in the business."

• The headline and sub-heading of this article were amended on 20 June 2013 to more accurately reflect the story. It was further amended on 24 June 2013 to correct the homophone referring to Kevin Owens as Locog's former design principle, rather than principal.

The settlement between design firm Atopia and Locog is one of the few legal wranglings over intellectual property to become public – and shows just how hard it is to prove an idea is one of a kind, writes Oliver Wainwright